Successful Hong Kong crypto ETF flows would pale in comparison to US funds

The projected medium-term $1 billion inflow total for the Hong Kong crypto funds would represent about 2% of the region’s ETF market

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Hong Kong’s regulator is set to allow spot bitcoin and ether ETFs to start trading by the end of the month, according to fund issuers. 

While such funds are not likely to welcome inflows anywhere near those seen by US bitcoin funds, industry watchers said they could spur other countries to greenlight crypto ETFs.

China Asset Management, Harvest Global Investments and Bosera International are set to each launch a BTC and ETH fund in the next week or so. The development comes after reports earlier this month that the Securities and Futures Commission (SFC) had unofficially approved such ETFs.

Read more: After crypto ETF movement in Hong Kong, other Asia regulators could act 

Bloomberg Intelligence analysts said they expect the initial six crypto funds that gained SFC approval to tally roughly $1 billion in flows in their first one or two years on the market. 

China Asset Management said in a Wednesday news release it intends to launch its bitcoin and ether funds on the Hong Kong Stock Exchange (HKEX) on April 30.

Thomas Zhu, the firm’s head of digital assets and its family office business, noted the growing adoption of ETFs across different kinds of allocators.

“The spot bitcoin and ether ETFs offer retail and institutional investors a safe, efficient and convenient means to invest in virtual assets in a regulated framework,” he added. “The in-kind feature also attracts coin holders by offering the ease of converting coins to fully regulated ETFs managed by professional fund managers and regulated custodians.” 

Competitor Harvest Global Investments said it also intends to list its spot BTC and ETH ETFs “by the end of April,” according to a Wednesday release.

“This not only meets the demand for high-growth assets but also allows investors direct participation in the rapidly evolving blockchain and digital asset opportunities, providing yet another key to entering the future AI-driven tech world,” Harvest CEO Han Tongli said in a statement. 

Bosera International said last week it intended to co-launch bitcoin and ether ETFs with HashKey Capital. A company spokesperson did not immediately return a request for comment. 

The six proposed funds by the three fund groups were listed on SFC’s website Wednesday — though a representative for the regulator had not commented at press time. 

What’s the impact?

Hong Kong’s approval of these ETFs comes a little more than three months after the Securities and Exchange Commission allowed the first US spot bitcoin ETFs to start trading. 

Those 11 funds have seen $12.4 billion of positive net flows so far. 

Bloomberg Intelligence analysts said in a Wednesday webinar that they expect the new Hong Kong crypto products to see about $1 billion of net inflows in the first year or two. 

This predicted flow total represents about 2% of Hong Kong’s $50 billion ETF market size, which is dwarfed by the $8.5 trillion or so assets in US ETFs. 

Investors in mainland China are unable to purchase these ETFs, Bloomberg analysts noted. 

“I think the Asian retail market loves volatility,” Bloomberg Intelligence analyst Rebecca Sin said on the webinar. “They love anything that swings massively … so I think this product fits well in Asia.” 

Beyond flows, Bloomberg equity research associate Sebastien Cabral called the approvals “significant” in terms of potentially spurring other Asian regulators to act in the space.   

“We do think that we could see some subsequent launches possibly in Singapore, South Korea and Japan coming soon,” Cabral noted. 

While the Hong Kong crypto ETF approvals follow bitcoin fund launches in Canada, the US and elsewhere, the SEC has not yet approved spot ether funds. 

The US regulator is set to rule on proposed ETH ETFs next month, with a number of industry watchers giving them a low likelihood of being approved at that time.


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